Unveiled: A plan for the biggest tax cut in history, or not. The White House released a one-page outline for tax changes yesterday—and it looks a lot like what Candidate Trump proposed last year. It would collapse seven individual tax brackets to three, with a top rate of 35 percent (it was 33 percent in the campaign). It would cut all business tax rates to 15 percent. But the outline was silent on the border adjustable tax and the House GOP leadership’s proposed business cash flow tax. As TPC’s Howard Gleckman noted, the document failed to specify a single tax increase to offset the generous tax cuts (though staffers did say the state and local deduction is on the block). Mostly, the plan would add trillions to the budget deficit and is neither tax reform nor the biggest tax cut in history.
A new tax subsidy for child care? The outline also said the White House wants “tax relief for families with child and dependent care expenses,” an idea reportedly pushed by first daughter Ivanka Trump. The administration offered few details on the how the plan would work, though staffers said it would be different from the deduction Trump proposed during the campaign.
How is the plan selling? Wall Street seemed uninterested, the realtors hated it, Democrats predictably dubbed it a non-starter, and Republicans tried hard to find nice things to say. In all, a less-than-auspicious start.
Sorry, Governor. Louisiana Governor John Bel Edwards withdrew his plan to levy a new tax on business sales. He faced tremendous opposition from conservative members of the state’s House Ways & Means committee. House Republicans now have to figure out how to balance Louisiana’s budget. The state will lose $1.3 billion next year when temporary taxes expire.
Connecticut faces a deficit and unhappy residents. The state legislature’s finance committee held hearings this week on tax proposals that could close a $1.7 billion deficit. One provision, to require nonprofits to pay state sales tax, generated a storm of criticism from private universities, hospitals, and nonprofit social services providers. Some Connecticut Republicans objected to even holding public hearings on tax increases, worry that even talking about tax hikes could have a chilling effect on the state's business climate.
Paying for border wall isn’t so easy. TPC’s Elaine Maag explains why Attorney General Jeff Sessions needs another way to pay for a border wall. In spite of Sessions’ assertion, cracking down on erroneously issued tax credits to “mostly Mexicans” won’t do the trick. Maag shows that “the credits in question are not being issued improperly; there is no evidence that Mexicans are recipients of the erroneous credits; and the disputed credits total about $4 billion a year, far less than the estimated $60+ billion cost of the wall.”
Michigan’s MEGA tax credit strikes again. The state agreed this week to transfer tax credits to Ohio-based AK Steel Corp. The company believes it inherited Michigan Economic Growth Authority (MEGA) and brownfield tax credits when it purchased the Rouge steel plant in Dearborn three years ago. The agreement is unprecedented, since Michigan tax code prohibits companies that pay its 6 percent corporate income tax from claiming MEGA tax credits. Those credits were available under the old Michigan business tax but ended in 2011.
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